WeeklyBasis 03/06/06: Bond Sell-off Continues

Fixed and ARM rates open this week up roughly .125%. We’ve been in the middle of a bond sell off for the past few trading days, not so much because of economic data from last week, but more a reaction to Europe and Japan hiking their rates. This means support for U.S. bonds could wane as investors look for better returns elsewhere. It hasn’t happened yet, but traders try to re-position ahead of anticipated trends. And in this case, when bonds sell off and their prices drop, their yields (or rates) rise. It’s likely we will see mortgage rates rise this week as the bond sell off continues. The biggest data release comes Friday with the monthly jobs growth & wage growth report. This is one of the most important monthly releases because it’s both a broad indicator of economic strength (are companies doing well enough to hire?) and also an inflation measure (are new employees in such demand that wages are increasing?). Friday’s data will impact the Fed’s rate plans for their next meeting on March 28. If jobs and wages are higher, look for rates to follow accordingly.